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Earthquake controversies in the New Madrid Seismic Zone

By Insure.com - Last updated: Dec. 20, 2006

There are two opposing views to most things; just one of them is the possibility and/or probability that a devastating earthquake (that would be 7.0+ on the Richter scale) will hit the New Madrid Seismic Zone within the next fifteen to fifty years. The New Madrid Zone, which is named after New Madrid, MO in commemoration of the massive earthquakes that hit the town in 1811-1812, stretches across areas of seven different states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, and Tennessee.

Although earthquakes in the Midwest are not as common as they are in the western United States (such as California) they do occur, sometimes with frightening intensity. In 1811, and again in 1812, earthquakes struck with unusual ferocity; the exact magnitudes of these two earthquakes are debated, but most scientists believe that they were somewhere between 7.0 and 8.0 on the Richter scale. Because there were relatively few inhabitants of this area in the 1800’s (compared with the large population today) the deaths resulting from these earthquakes were relatively few, and damage of man-made structures was limited.

Although the damage was minimal two hundred years ago, the Central United States Earthquake Preparedness Project (CUSEPP) published a study in October of 1985 that stated the modern costs of a similar earthquake. CUSEPP projected that if a 7.6 magnitude earthquake struck the New Madrid Zone, there would probably be thousands of deaths, and hundreds of thousands of people made homeless. Brian Blake, the current Program Coordinator of the Central United States Earthquake Consortium (CUSEC), an institution that collaborated with CUSEPP on the 1985 "Six Cities Study, states that the findings of the 1985 study have changed. "It is not that the results aren't valid anymore, it is that the entire makeup of the central U.S. has changed in the last 20 years. The population is much larger, there is a bigger economic base, a more complicated infrastructure, etc. " CUSEC has recently published a newer version of the original report on their website, "A HAZUS Comparison of the 1985 Six Cities Study"

The Inland Marine Underwriters Association (an industry trade group) reported a few years ago, that in the event of a 7.0 magnitude earthquake, insurance damages would most probably reach $6 billion. However, research done by the Insurance Information Institute (III) reports that insurance damage could reach upwards of $80 billion. Homeowners and business owners would be partially responsible for such large losses, because of they “have failed to take steps to mitigate potential earthquake damage.” Such a catastrophe would decimate the insurance industry as well as the national economy.

Scientists who have studied the New Madrid Seismic Zone are able to find historical information about earthquake probability through sand deposits under the Mississippi River Valley. According to the U.S. Geological Survey FS-131-02, these deposits have been evaluated and found to have occurred at approximately A.D. 900 and A.D. 1450. Since the sand deposits come from strong earthquakes, many scientists believe that earthquakes occur in this region every 500 years or so, making the odds higher that a major earthquake would strike in the near future.

Earthquake possibilities in the New Madrid zone

Magnitude

Probability in the next 15 years (%)

Probability in the next 50 years (%)

6.3

40-63

86-97

7.6

5.4-8.7

19-29

8.3

0.3-1.0

2.7-4.0

The idea of a high earthquake probability triggered reactionary moves by insurance companies, who either increased the deductibles on earthquake policies or stopped writing new quake policies altogether. For example, State Farm (the largest home insurer in the nation) raised deductibles, and in 1996, stopped writing quake policies in several counties of Tennessee. Allstate Insurance Co. joined State Farm in raising deductibles, while Farmers Insurance Co. stopped selling quake policies in Tennessee, Mississippi and Kentucky.

Recent scientific findings, however, have changed the way professionals (both of science and of insurance) view the New Madrid Seismic Zone, and the probability of a devastating earthquake in the near future. The Science Magazine reported in April of 1999 that the time within the cycle of earthquake activity is much larger, and that large earthquakes would probably not occur again for 1,000-2,500 years.

The Central United States Earthquake Consortium (CUSEC), the U.S. Geological Survey (USGS), and the Center for Earthquake Research and Information of the University of Memphis report the current predictions for earthquake activity in the Midwest . These three prestigious scientific institutions agree that there is a 7% - 10% chance of 7.0-8.0 magnitude earthquakes in the next fifty years, and a 25% - 40% chance of a 6.0 or larger earthquakes in the next fifty years.

This change in scientific theory has been reflected in insurance. The Arkansas Department of Insurance reports that there are currently 56 companies that offer earthquake insurance. Bill Lacy, Director of the Property and Casualty Division of the Arkansas Department of Insurance, states that only two national companies, Safeco and Allstate, have permanently withdrawn from selling earthquake policies. "I would say the situation is much improved from the mid 90s," Lacy tells Insure.com, noting the existence of the "very good market assistance program in place for those who cannot find coverage in the private market." Allstate has recently withdrawn not only from Arkansas, but also from Tennessee. According to John F. Morris, Deputy Commissioner for the Tennessee Department of Commerce and Insurance, "Allstate withdrew from the earthquake market in both new business (March 6) and existing business/renewals (September 14). Still, the Department is not aware of an availability issure in the state at the current time."

The Department of Insurance of Missouri is reviewing their current policies regarding earthquakes in the New Madrid Seismic Zone, and discussions are under way to bring back homeowners policies at the lower standard price. The Department did not respond to Insure.com's questions about the current status of earthquake insurance in the state.

The idea of the causes or working of the New Madrid Zone will likely never be settled, but science is inching closer to a more unified look at the predictability of the future of this zone.